Germany’s ‘strategic reserves’ for coal under fire in EU Council

A group of seven countries – comprising France, Poland, Italy, Hungary, Greece, Ireland and the UK – have issued a common position on the reform of Europe’s electricity market, saying “strategic reserves” for electricity should not receive favourable treatment from regulators.

The statement is a clear reference to Germany, which closed eight lignite power plants in 2015 and transferred them into a “strategic reserve” that can be used as back-up in case of emergency.

Berlin argues the “strategic reserve” is necessary to accompany the country’s transition to renewables and phase-out from nuclear power. The German scheme received clearance by the European Commission in February under the EU’s state aid rules.

But Poland has complained of “double standards” because the scheme exempts German coal plants from environmental standards, including the upcoming CO2 emission limits that are currently being discussed as part of the ongoing reform of the EU’s electricity market.

“One of our concerns is a lack of balance in the European Parliament approach to different types of capacity mechanisms” that governments use to remunerate back-up power plants, argues the seven-country group in their joint position, saying the EU’s new single market rules for electricity should “apply similarly to all”.

“Consequently, we cannot agree on giving priority to strategic reserves as the best and preferred way to solve adequacy concerns. Furthermore, all capacity mechanisms, including strategic reserves, should fulfil the emissions performance standard requirements set by the new Regulation,” the group says, referring to CO2 emission limits, which are currently being discussed as part of the EU reform.

“Strategic reserves…should be limited to operating in only critical situations (e.g. in extreme system stress events),” the statement adds.

“Capacity mechanisms” are national schemes that remunerate power plants – usually coal and gas-fired – for remaining on stand-by in case of emergency. The Commission cleared a number of those schemes in February, leading to accusations in Parliament that it was pre-empting the ongoing negotiation to reform of the EU single market for electricity.

The Commission has since made clear that it will review its February state aid decision in light of the new rules and that Germany will not be spared from the review.

U legislators are meeting on Tuesday (11 September) in an attempt to thrash out a common position on the electricity market reform. The series of trilogue talks involving the European Commission, Parliament, and the 28 EU member states in the Council are expected to conclude in November or December.

Poland’s energy minister, Krzysztof Tchórzewsk, said the joint paper came “as a result of our initiative” and was a “joint contribution to the further discussions in the trilogues”.

“In our approach to the capacity mechanisms, we are not alone in the European Union,” the Polish minister said on Wednesday evening at the Krynica Economic Forum.

“I am convinced that the unanimous position of such a big group of member states…will have a positive impact on the further negotiations,” he said.